Seven years since Barcelona

Economic Services Minister Josef Bonnici opens the second session of the Euromed Working Group on Regional Integration. Bonnici overviews Malta’s role in the Euro-Mediterranean trade zone, which, with 30 to 40 countries representing 600 to 800 million people, will be the largest free trade zone in the world

In the seven years since the Barcelona Declaration all partners have participated in the Euro-Med free trade initiative and the Association process is now almost complete, as negotiations have still to be concluded only with Syria.

This Euro-Mediterranean zone will constitute the largest free-trade area in the world, covering 600 to 800 million people and some 30 to 40 countries. The creation of a Euromed Free Trade Area by means of North-South Co-operation cannot by itself create the solid institutional base necessary to attract the much needed and lacking foreign investment in Southern Mediterranean countries. A network of association agreements, even when completed, will not be enough to provide the foundations of a Euro-Mediterranean economic space. This will not be possible until the current bilateral scheme is transformed into a regional multilateral arrangement by the conclusion of south/south free trade agreements and the harmonisation of regulatory frameworks in areas such as customs, norms and standards, and intellectual and industrial property protection. This is why during the last Euromed Trade Ministerial Meeting in Toledo, Euromed Trade Ministers decided to create this Working Group on Regional Integration.

The consolidation of the PanEuroMed originating protocol, by means of which diagonal cumulation has now been extended to the Mediterranean countries, is an important tool for promoting trade and investment flows within our region. In this way, rules of origin have now been harmonised within the PanEuroMed region.

Businesses have to benefit from an economic environment where trade and investment is facilitated by an approximation and the convergence of the regulatory provisions including the free movement of goods, standards, right of establishment and intellectual property. I know that this morning the subject of customs procedures will be discussed in detail. I must note here the substantial reform in Malta’s customs administration and a new consolidated Customs Code in line with that of the European Union came into effect, together with the implementing provisions, on 30 June of this year.

Regarding computerisation and interconnectivity, Malta has designed implementation plans for an ‘e-Customs’-system including a new computerised entry-processing system with a risk analysis module and a data warehouse. It is aimed at ensuring that all IT interconnectivity requirements with Community systems are met. The implementation of this work started in the beginning of 2002. You will have more details right after my speech from a representative from Maltese customs.

Malta has made rapid progress in its liberalisation efforts during the past fifteen years. It remains one of our underlying objectives and we are currently moving ahead in this direction through the dismantling of import levies. In fact, levies on all industrial products will have been removed by the 1st January 2003 while levies on agricultural products and processed foodstuffs will be eliminated upon our accession to the European Union.

This process of liberalisation is crucial. This is confirmed by the statistical analysis of the local manufacturing sector, which shows that the more export-oriented firms tend to invest more, are the largest employers and pay the highest wages. From past experience it is manifest that protectionist policies lead to less product development and production methods innovation.

At the present time, domestically oriented companies are undergoing the necessary restructuring to catch up with other companies all over the world that, prompted by trade liberalisation, have sought to improve themselves and their products so as to be able to gain a competitive advantage over their competitors. Thus increased competition will lead to more efficient companies selling higher quality products. Of course, the necessary investment to create state of the art products requires a turnover large enough to justify this expenditure. The small domestic market necessarily requires local companies to look beyond our shores for increased business opportunities.

Malta currently carries out most of its trade with the EU. This is partly due to the Association Agreement Malta has with this economic bloc as well as Malta’s proximity both physically and culturally to this market. Last Friday Malta concluded all negotiations with the European Union. Through EU membership, not only will all remaining trade barriers between Malta and the EU be completely dismantled but Malta will be fully integrated within the single European market. As a result local industry will have greater flexibility in the sourcing of raw materials and will find it easier to sell its products within the EU. Customs procedures for inputs from the EU will be radically simplified.

EU membership would also allow Malta complete free access not only to EU member states but also to ALL countries with which the EU has concluded preferential trade agreements. The business potential of these countries including of course the North African and Middle East markets is enormous. Malta’s physical and cultural proximity to both the Mediterranean and European countries make it an ideal facilitator of investment directed to this region.

Malta’s adoption of the acquis has proved a catalyst to the adoption of internationally recognised standards and the implementation of the necessary support mechanism. Some quarters have interpreted this investment as money spent to abide to EU rules. However, the bottom line is clear-cut enough: if a company wants to export to the EU, it must have its products abiding with EU standards if it wants its product to be allowed to enter the EU single market.

The setting up of a body that can certify local companies means that such companies will gain from being able to have their products tested locally rather than embarking on the hefty expenditure of having to use foreign standardisation bodies. Expenditure on ‘capacity building’ at the Malta Standards Authority has amounted to a total of about Euro 1.83 million of which Euro 1.35 million has come from EU pre-accession funding. This has been, undoubtedly, a very important and worthwhile investment. I understand that you will hear more in detail of the Malta Standards Authority, as you will have a presentation by the chairman this afternoon.

Thus the process towards EU membership has not only prompted Malta to adopt the quality standards already applied within the EU but has also helped us in the relevant upgrading and institutional development process.

Wider market access and the necessary infrastructure to export such as the setting up of standards certifying bodies are key ingredients to increase the attractiveness of Malta as an investment location.

The volume of foreign direct investment is crucial to the Mediterranean region's future. But the substantial flow of investment to the emerging economies has passed the Mediterranean partners by a considerable degree. It is with this fact in mind that various technical working groups have been established during the two Euromed Trade Ministerial meetings held so far. I trust that this working group will also continue in its efforts today to come up with concrete recommendations for future work on further harmonisation in other areas as described in the Action Plan on Trade and Investment Facilitation.

I augur you all to make good progress so that your conclusions will be then reported at the next Trade Ministerial Meeting.